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What does football have to do with takeover disclosure obligations?

21/08/2018 – By Gaurav Chandra, Product Manager, AxiomSL EMEA

Recently, the American investor Stan Kroenke, who owns 67% of the London football club Arsenal through his investment company KSE, launched a £1.8bn takeover bid to buy the club. And, according to a stock exchange announcement by KSE, Alisher Usmanov, another major Arsenal shareholder, agreed to sell his 30% stake of the club. If the bid is successful, Stan Kroenke, as the majority shareholder, will own more than 97% of the club’s shares. This has raised concerns amongst the remaining shareholders which are typically associated with any takeover transaction in terms of how one offeror may assume control over the management of the offeree and impact the direction of the company and its share value.

Takeover Regime: Why it matters

A takeover is generally defined as the act of a company (offeror) aiming to acquire and control another company (offeree). The Takeover Regime is an enhanced disclosure requirement that applies to shareholders of relevant securities of companies involved in or subject to a takeover bid, and the shareholders acting in concert with such parties. To ensure transparency, regulators in the UK impose additional disclosure requirements on the entities involved in the deal and furthermore demand stringent takeover reporting requirements. As mentioned previously, the objective of the takeover regime is to provide transparency to the market by allowing all shareholders and market participants to be aware of the deal, and to ensure that all relevant parties to an offer are treated fairly.

Reporting requirements

During the offer period, parties to the offer, their concert parties and shareholders (under certain circumstances) must report their holdings and/or dealings in the offeree, and potentially in the offeror, no later than 12:00pm or 3:30pm on the next business day. The relevant regulator then publishes the holdings/dealings information accordingly.

Under the Takeover Regime, there are generally two types of disclosure forms: Opening Position Disclosure (OPD) and Dealings Disclosure (DD). An OPD contains details of the holder’s positions in the relevant securities during the offer period, whilst a DD includes transactions and dealings details. Knowing which disclosure reporting form to use is crucial as it varies depending on the type of institution and their relationship to a particular deal.

Key challenges

Regulators around the world require shareholding disclosures which include significant holdings, short selling and takeover reporting. Adhering to these complex monitoring and reporting requirements in a timely manner can be extremely difficult. The underlying rules vary across the globe with different instruments in-scope for the monitoring calculations and this creates an enormous burden for global investors to remain compliant.

These challenges are further complicated by firms having to constantly monitor the respective takeover panels across the globe to track the deals, like the Arsenal deal, as well as the updates on relevant regulatory requirements. To fulfil all global disclosure requirements, firms must not only monitor changes in their holdings and group structure, but they also need to constantly track changes to the Shareholder Disclosure (SD) regulations in all countries where they have holdings.

Why automation is critical

Automation is central to tackling the growing burden of reporting requirements and greatly reduces firms’ efforts to remain compliant with SD reporting requirements as well as minimise any operational risk often associated with human errors.

AxiomSL’s SD solution can populate accurate reports and enable your firm to deal with the wide-ranging disclosure requirements with ease and confidence, as well as build and sustain a robust compliance infrastructure. We deliver a hassle-free approach, providing the rule sets, calculations, templates and reporting functionality needed to remain fully compliant with global shareholding disclosure requirements in more than 90 jurisdictions. AxiomSL’s strategic platform also allows firms to validate and submit the reports directly from the solution. These benefits overall offer a greater flexibility for companies and reduces their operational risk.